Item 1. Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Overview and Basis of Presentation
Nature of Business
We are an international experiential services company with operations in the United States, Canada, the United Kingdom, continental Europe, the United Arab Emirates, and Iceland. We are committed to providing unforgettable experiences to our clients and guests. We operate through three reportable business segments: GES North America, GES EMEA (collectively, “GES”), and Pursuit.
GES
GES is a global, full-service live events company offering a comprehensive range of services to event organizers and corporate brand marketers. Event organizers schedule and run events from start to finish. Corporate brand marketers include exhibitors and domestic and international corporations that want to promote their brands, services and innovations, feature new products, and build business relationships. GES serves corporate brand marketers when they exhibit at shows and when GES is engaged to manage their global exhibit program or produce their proprietary corporate events.
Pursuit
Pursuit is a collection of inspiring and unforgettable travel experiences that include recreational attractions, unique hotels and lodges, food and beverage, retail, sightseeing, and ground transportation services. Pursuit comprises the Banff Jasper Collection, the Alaska Collection, the Glacier Park Collection, and FlyOver.
Impact of COVID-19 and Going Concern
On March 11, 2020, the World Health Organization declared COVID-19 a “pandemic.” COVID-19 has spread rapidly, with a high concentration of confirmed cases in the U.S. and other countries in which we operate. The rapid spread has resulted in authorities around the world implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. The COVID-19 pandemic and these containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional, and national economies.
The COVID-19 pandemic is having and will likely continue to have a significant and negative impact on our operations and financial performance, with live event and tourism activities largely shut down. As a result, we have taken the following measures to improve our liquidity position due to COVID-19:
|
|
•
|
On March 17, 2020, we borrowed $123 million under the revolving credit facility (the “2018 Credit Facility”) as a proactive measure to increase our cash position and preserve financial flexibility. At the end of March 2020, we repaid $32 million and in early April 2020, we borrowed $31 million under the 2018 Credit Facility. Refer to Note 12 – Debt and Finance Lease Obligations and Note 24 – Subsequent Events;
|
|
|
•
|
We implemented aggressive cost reduction actions, including furloughs, mandatory unpaid time off, or salary reductions for all employees;
|
|
|
•
|
Our executive management voluntarily reduced its base salaries by 20% to 50%;
|
|
|
•
|
The non-employee members of our Board of Directors agreed to reduce their annual cash retainer and committee retainers by 50% for payments typically made to them in the second quarter of 2020;
|
|
|
•
|
We have eliminated all non-essential capital expenditures and discretionary spending;
|
|
|
•
|
In March 2020, our Board of Directors suspended future dividend payments and share repurchases;
|
|
|
•
|
On April 20, 2020, we suspended our 401(k) Plan employer match contributions. Refer to Note 24 – Subsequent Events;
|
|
|
•
|
On May 8, 2020, we obtained a waiver of our financial covenants for the quarter ending June 30, 2020. Refer to Note 12 – Debt and Finance Lease Obligations and Note 24 – Subsequent Events;
|
|
|
•
|
We availed ourselves of governmental assistance programs for wages and tax relief; and
|
|
|
•
|
In May 2020, we terminated our legacy life insurance policies on former employees and received the cash proceeds of $24.8 million. Refer to Note 8 – Other Investments and Assets and Note 24 – Subsequent Events.
|
Although we were in compliance with the financial covenants of our Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”) as of March 31, 2020, disruptions caused by the COVID-19 pandemic have had and are likely to continue to have
7
a significant and negative impact on our operations and financial performance. In May 2020, we entered into an amendment to our 2018 Credit Agreement, which waived our financial covenants for the quarter ending June 30, 2020 and added a new minimum liquidity requirement. However, we expect to be unable to meet our financial covenants beginning with the quarter ending September 30, 2020, and as a result, the entire $412.6 million balance outstanding under the 2018 Credit Facility as of March 31, 2020 has been classified as a current liability. We are actively negotiating with our lenders to further amend our 2018 Credit Agreement, and we are pursuing options to raise capital and enhance our liquidity position. We cannot provide any assurance regarding the likelihood, certainty, or exact timing of our ability to raise capital or our ability to obtain further amendments to the 2018 Credit Agreement in a timely manner, or on acceptable terms, if at all. If we are unable to raise capital or obtain a waiver to our financial covenants, our lenders may exercise remedies against us, including the acceleration of our outstanding indebtedness. We also expect to be unable to meet our financial covenants under our FlyOver Iceland Credit Facility beginning with the quarter ending September 30, 2020, and as a result, the $5.3 million balance outstanding as of March 31, 2020 has been classified as a current liability. We have concluded that the shut-down of live event and tourism activities resulting in substantial net losses and operating cash outflows and the expected inability to maintain compliance with debt covenants discussed above raise substantial doubt about our ability to continue as a going concern for a period through one year from the issuance of the financial statements. We have prepared the financial statements on a going concern basis, which do not include any adjustments that might result from the outcome of this uncertainty.
Due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19, we determined an interim triggering event had occurred, which required us to assess the carrying values of goodwill and intangible assets in accordance with Accounting Standards Codification (“ASC”) No. 350, Intangibles – Goodwill and Other. Based on this assessment, we recorded a non-cash goodwill impairment charge of $72.7 million during the three months ended March 31, 2020 associated with the GES U.S., GES EMEA, and Pursuit’s Glacier Park Collection reporting units. Additionally, during the three months ended March 31, 2020, we recorded a non-cash impairment charge to other intangible assets of $15.7 million related to our U.S. audio-visual production business. The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve. Refer to Note 9 – Goodwill and Other Intangible Assets for additional information.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by GAAP or SEC rules and regulations for complete financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 26, 2020 (“2019 Form 10-K”). We corrected the classification of debt as of December 31, 2019. Refer to Note 12 – Debt and Finance Lease Obligations.
The condensed consolidated financial statements include the accounts of Viad and its subsidiaries. We have eliminated all significant intercompany account balances and transactions in consolidation.
Impact of Recent Accounting Pronouncements
The following table provides a brief description of recent accounting pronouncements:
|
Standard
|
|
Description
|
|
Date of adoption
|
|
Effect on the financial statements
|
|
Standards Not Yet Adopted
|
|
ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes
|
|
The amendment enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as ownership changes in investments, and interim-period accounting for enacted changes in tax law.
|
|
1/1/2021
|
|
We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements. We do not expect this new guidance to have a material impact on our consolidated financial statements.
|
8
|
Standard
|
|
Description
|
|
Date of adoption
|
|
Effect on the financial statements
|
|
Standards Recently Adopted
|
|
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments
|
|
The amendment eliminates the incurred credit loss impairment methodology and replaces it with an expected credit loss concept based on historical experience, current conditions, and reasonable and supportable forecasts.
|
|
1/1/2020
|
|
We adopted this new standard on a modified retrospective basis. The adoption of this new standard on January 1, 2020 did not have a material impact on our condensed consolidated financial statements. However, due to the significant economic impact of COVID-19, we recorded an increase of $2.8 million to the provision for credit losses during March 2020.
|
|
|
ASU 2020-04, Reference Rate Reform (Topic 848)
|
|
The amendment provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. Topic 848 provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met.
|
|
3/12/2020
|
|
Topic 848 was effective beginning on March 12, 2020, and we will apply the amendments prospectively through December 31, 2022. There was no impact to our condensed consolidated financial statements for the quarter ended March 31, 2020 as a result of adopting this amendment.
|
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Estimates and assumptions are used in accounting for, among other things: impairment testing of recorded goodwill and intangible assets; allowances for uncollectible accounts receivable; provisions for income taxes, including uncertain tax positions; valuation allowances related to deferred tax assets; liabilities for losses related to self-insured liability claims; liabilities for losses related to environmental remediation obligations; sublease income associated with restructuring liabilities; pension and postretirement benefit costs and obligations; share-based compensation costs; the discount rates used to value lease obligations; the redemption value of redeemable noncontrolling interests; and the allocation of purchase price of acquired businesses. Actual results could differ from these and other estimates.
Revenue Recognition
Revenue is measured based on a specified amount of consideration in a contract with a customer, net of commissions paid to customers and amounts collected on behalf of third parties. We recognize revenue when a performance obligation is satisfied by transferring control of a product or service to a customer.
GES’ service revenue is primarily derived through its comprehensive range of services to event organizers and corporate brand marketers including Core Services, Event Technology, and Audio-Visual. GES’ service revenue is earned over time over the duration of the exhibition, conference, or corporate event, which generally lasts one to three days. GES’ product revenue is derived from the build of exhibits and environments and graphics. GES’ product revenue is recognized at a point in time upon delivery of the product.
Pursuit’s service revenue is derived through its admissions, accommodations, transportation, and travel planning services. Pursuit’s product revenue is derived through food and beverage and retail sales. Pursuit’s revenue is recognized at the time services are performed or upon delivery of the product. Pursuit’s service revenue is recognized over time as the customer simultaneously receives and consumes the benefits. Pursuit’s product revenue is recognized at a point in time.
Noncontrolling Interests – Non-redeemable and Redeemable
Non-redeemable noncontrolling interest represents the portion of equity in a subsidiary that is not attributable, directly or indirectly, to us. Our non-redeemable noncontrolling interest relates to the 20% equity ownership interest that we do not own in Glacier Park, Inc., the 40% equity interest that we do not own in the Mountain Park Lodges, and the 49% equity interest that we do not own in the new entity that will operate the Pursuit Sky Lagoon attraction. We report non-redeemable noncontrolling interest within stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of consolidated net income or loss attributable to Viad and the non-redeemable noncontrolling interest is presented in the Condensed Consolidated Statements of Operations.
We consider noncontrolling interests with redemption features that are not solely within our control to be redeemable noncontrolling interests. Our redeemable noncontrolling interest relates to our 54.5% equity ownership interest in Esja Attractions ehf. (“Esja”), which owns the FlyOver Iceland attraction. The Esja shareholders agreement contains a put option that gives the minority Esja
9
shareholders the right to sell (or “put”) their Esja shares to us based on a calculated formula within a predefined term. This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the Condensed Consolidated Balance Sheets. The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the Condensed Consolidated Statements of Operations and the accretion of the redemption value is recorded as an adjustment to retained earnings and is included in our income per share. Refer to Note 21 – Redeemable Noncontrolling Interest for additional information.
Leases
We recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet and classify leases as either finance or operating leases. The classification of the lease determines whether we recognize the lease expense on an effective interest method basis (finance lease) or on a straight-line basis (operating lease) over the lease term. In determining whether an agreement contains a lease, we consider if we have a right to control the use of the underlying asset during the lease term in exchange for an obligation to make lease payments arising from the lease. We recognize ROU assets and lease liabilities at commencement date, which is when the underlying asset is available for use to a lessee, based on the present value of lease payments over the lease term.
Our operating and finance leases are primarily facility, equipment, and land leases. Our facility leases comprise mainly manufacturing facilities, sales and design facilities, offices, storage and/or warehouses, and truck marshaling yards. These facility leases generally have lease terms ranging up to 25 years. Our equipment leases comprise mainly vehicles, hardware, and office equipment, each with various lease terms. Our land leases comprise mainly leases in Canada and Iceland on which our hotels or attractions are located and have lease terms ranging up to 42 years.
If a lease contains a renewal option that is reasonably certain to be exercised, then the lease term includes the optional periods in measuring a ROU asset and lease liability. We evaluate the reasonably certain threshold at lease commencement, and it is typically met if we identify substantial economic incentives or termination penalties. We do not include variable leases and variable non-lease components in the calculation of the ROU asset and corresponding lease liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay our lessors an estimate that we adjust to actual expense on a quarterly or annual basis depending on the underlying contract terms. We expense these variable lease payments as incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.
Substantially all of our lease agreements do not specify an implicit borrowing rate, and as such, we utilize an incremental borrowing rate based on lease term and country, in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a collateralized basis and is the expected rate at which we would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term and the country.
We are also a lessor to third party tenants who either lease certain portions of facilities that we own or sublease certain portions of facilities that we lease. We record lease income from owned facilities as rental income and we record sublease income from leased facilities against lease expense in the Condensed Consolidated Statements of Operations. We classify all of our leases for which we are the lessor as operating leases.
Note 2. Revenue and Related Contract Costs and Contract Liabilities
GES’ performance obligations consist of services or product(s) outlined in a contract. While we often sign multi-year contracts for recurring events, the obligations for each occurrence are well defined and conclude upon the occurrence of each event. The obligations are typically the provision of services and/or sale of a product in connection with an exhibition, conference, or other event. GES’ revenue is earned over time over the duration of the event, but as a practical expedient we recognize revenue when we have a right to invoice at the close of the exhibition, conference, or corporate event, which typically lasts one to three days or when a customer cancels a contract. We recognize revenue for consumer events over the duration of the event. We recognize revenue for products either upon delivery to the customer’s location, upon delivery to an event that we are serving, or when we have the right to invoice, generally at the close of the exhibition, conference, or corporate event, or when a customer cancels a contract. If a customer cancels a contract, then GES is generally contractually able to invoice the customer for contract costs that have been incurred by GES in preparing for the exhibition, conference, or corporate event. Payment terms are generally within 30-60 days and contain no significant financing components.
Pursuit’s performance obligations are short-term in nature. They include the provision of a hotel room, an attraction admission, a chartered or ticketed bus or van ride, the fulfillment of travel planning itineraries, and/or the sale of food, beverage, or retail products. We recognize revenue when the service has been provided or the product has been delivered. When we extend credit, payment terms are generally within 30 days and contain no significant financing components.
10
Contract Liabilities
GES and Pursuit typically receive customer deposits prior to transferring the related product or service to the customer. We record these deposits as a contract liability, which are recognized as revenue upon satisfaction of the related contract performance obligation(s). GES also provides customer rebates and volume discounts to certain event organizers that we recognize as a reduction of revenue. We include these amounts in the Condensed Consolidated Balance Sheets under the captions “Contract liabilities” and “Other deferred items and liabilities.”
Changes to contract liabilities are as follows:
|
(in thousands)
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$
|
50,796
|
|
|
Cash additions
|
|
|
53,284
|
|
|
Revenue recognized
|
|
|
(64,430
|
)
|
|
Foreign exchange translation adjustment
|
|
|
(1,482
|
)
|
|
Balance at March 31, 2020
|
|
$
|
38,168
|
|
Contract Costs
GES capitalizes certain incremental costs incurred in obtaining and fulfilling contracts. Capitalized costs principally relate to direct costs of materials and services incurred in fulfilling services of future exhibitions, conferences, and events, and also include up-front incentives and commissions incurred upon contract signing. We expense costs associated with preliminary contract activities (i.e. proposal activities) as incurred. Capitalized contract costs are expensed upon the transfer of the related goods or services and are included in cost of services or cost of products, as applicable. We include the deferred incremental costs of obtaining and fulfilling contracts in the Condensed Consolidated Balance Sheets under the captions “Current contract costs” and “Other investments and assets.”
Changes to contract costs are as follows:
|
(in thousands)
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$
|
28,496
|
|
|
Additions
|
|
|
11,672
|
|
|
Expenses
|
|
|
(17,679
|
)
|
|
Cancelled
|
|
|
(2,086
|
)
|
|
Foreign exchange translation adjustment
|
|
|
(644
|
)
|
|
Balance at March 31, 2020
|
|
$
|
19,759
|
|
As of March 31, 2020, capitalized contract costs consisted of $1.7 million to obtain contracts and $18.1 million to fulfill contracts. We did not recognize an impairment loss with respect to capitalized contract costs during the three months ended March 31, 2020 or 2019.
11
Disaggregation of Revenue
The following tables disaggregate GES and Pursuit revenue by major product line, timing of revenue recognition, and markets served:
GES
|
|
|
Three Months Ended March 31, 2020
|
|
|
(in thousands)
|
|
GES North America
|
|
|
GES EMEA
|
|
|
Intersegment Eliminations
|
|
|
Total
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core services
|
|
$
|
210,183
|
|
|
$
|
26,503
|
|
|
$
|
—
|
|
|
$
|
236,686
|
|
|
Audio-visual
|
|
|
17,430
|
|
|
|
4,034
|
|
|
|
—
|
|
|
|
21,464
|
|
|
Event technology
|
|
|
5,554
|
|
|
|
2,861
|
|
|
|
—
|
|
|
|
8,415
|
|
|
Intersegment eliminations
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,989
|
)
|
|
|
(1,989
|
)
|
|
Total services
|
|
|
233,167
|
|
|
|
33,398
|
|
|
|
(1,989
|
)
|
|
|
264,576
|
|
|
Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products
|
|
|
18,591
|
|
|
|
9,318
|
|
|
|
—
|
|
|
|
27,909
|
|
|
Total revenue
|
|
$
|
251,758
|
|
|
$
|
42,716
|
|
|
$
|
(1,989
|
)
|
|
$
|
292,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time
|
|
$
|
233,167
|
|
|
$
|
33,398
|
|
|
$
|
(1,989
|
)
|
|
$
|
264,576
|
|
|
Products transferred over time(1)
|
|
|
10,577
|
|
|
|
2,450
|
|
|
|
—
|
|
|
|
13,027
|
|
|
Products transferred at a point in time
|
|
|
8,014
|
|
|
|
6,868
|
|
|
|
—
|
|
|
|
14,882
|
|
|
Total revenue
|
|
$
|
251,758
|
|
|
$
|
42,716
|
|
|
$
|
(1,989
|
)
|
|
$
|
292,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions
|
|
$
|
184,358
|
|
|
$
|
32,547
|
|
|
$
|
—
|
|
|
$
|
216,905
|
|
|
Conferences
|
|
|
35,890
|
|
|
|
4,807
|
|
|
|
—
|
|
|
|
40,697
|
|
|
Corporate events
|
|
|
26,964
|
|
|
|
5,154
|
|
|
|
—
|
|
|
|
32,118
|
|
|
Consumer events
|
|
|
4,546
|
|
|
|
208
|
|
|
|
—
|
|
|
|
4,754
|
|
|
Intersegment eliminations
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,989
|
)
|
|
|
(1,989
|
)
|
|
Total revenue
|
|
$
|
251,758
|
|
|
$
|
42,716
|
|
|
$
|
(1,989
|
)
|
|
$
|
292,485
|
|
|
(1)
|
GES’ graphics product revenue is earned over time over the duration of the event as it is considered a part of the single performance obligation satisfied over time.
|
12
|
|
|
Three Months Ended March 31, 2019
|
|
|
(in thousands)
|
|
GES North America
|
|
|
GES EMEA
|
|
|
Intersegment Eliminations
|
|
|
Total
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core services
|
|
$
|
179,873
|
|
|
$
|
31,063
|
|
|
$
|
—
|
|
|
$
|
210,936
|
|
|
Audio-visual
|
|
|
18,406
|
|
|
|
3,888
|
|
|
|
—
|
|
|
|
22,294
|
|
|
Event technology
|
|
|
8,763
|
|
|
|
2,953
|
|
|
|
—
|
|
|
|
11,716
|
|
|
Intersegment eliminations
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,690
|
)
|
|
|
(2,690
|
)
|
|
Total services
|
|
|
207,042
|
|
|
|
37,904
|
|
|
|
(2,690
|
)
|
|
|
242,256
|
|
|
Products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core products
|
|
|
16,199
|
|
|
|
16,472
|
|
|
|
—
|
|
|
|
32,671
|
|
|
Total revenue
|
|
$
|
223,241
|
|
|
$
|
54,376
|
|
|
$
|
(2,690
|
)
|
|
$
|
274,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services transferred over time
|
|
$
|
207,042
|
|
|
$
|
37,904
|
|
|
$
|
(2,690
|
)
|
|
$
|
242,256
|
|
|
Products transferred over time(1)
|
|
|
11,269
|
|
|
|
3,479
|
|
|
|
—
|
|
|
|
14,748
|
|
|
Products transferred at a point in time
|
|
|
4,930
|
|
|
|
12,993
|
|
|
|
—
|
|
|
|
17,923
|
|
|
Total revenue
|
|
$
|
223,241
|
|
|
$
|
54,376
|
|
|
$
|
(2,690
|
)
|
|
$
|
274,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions
|
|
$
|
136,429
|
|
|
$
|
45,655
|
|
|
$
|
—
|
|
|
$
|
182,084
|
|
|
Conferences
|
|
|
47,862
|
|
|
|
2,982
|
|
|
|
—
|
|
|
|
50,844
|
|
|
Corporate events
|
|
|
32,787
|
|
|
|
5,545
|
|
|
|
—
|
|
|
|
38,332
|
|
|
Consumer events
|
|
|
6,163
|
|
|
|
194
|
|
|
|
—
|
|
|
|
6,357
|
|
|
Intersegment eliminations
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,690
|
)
|
|
|
(2,690
|
)
|
|
Total revenue
|
|
$
|
223,241
|
|
|
$
|
54,376
|
|
|
$
|
(2,690
|
)
|
|
$
|
274,927
|
|
|
(1)
|
GES’ graphics product revenue is earned over time over the duration of an event as it is considered a part of the single performance obligation satisfied over time.
|
13
Pursuit
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
Admissions
|
|
$
|
4,102
|
|
|
$
|
3,525
|
|
|
Accommodations
|
|
|
4,517
|
|
|
|
2,418
|
|
|
Transportation
|
|
|
2,056
|
|
|
|
1,995
|
|
|
Travel planning
|
|
|
416
|
|
|
|
632
|
|
|
Intersegment eliminations
|
|
|
(111
|
)
|
|
|
(185
|
)
|
|
Total services revenue
|
|
|
10,980
|
|
|
|
8,385
|
|
|
Products:
|
|
|
|
|
|
|
|
|
|
Food and beverage
|
|
|
1,649
|
|
|
|
1,364
|
|
|
Retail operations
|
|
|
894
|
|
|
|
918
|
|
|
Total products revenue
|
|
|
2,543
|
|
|
|
2,282
|
|
|
Total revenue
|
|
$
|
13,523
|
|
|
$
|
10,667
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition:
|
|
|
|
|
|
|
|
|
|
Services transferred over time
|
|
$
|
10,980
|
|
|
$
|
8,385
|
|
|
Products transferred at a point in time
|
|
|
2,543
|
|
|
|
2,282
|
|
|
Total revenue
|
|
$
|
13,523
|
|
|
$
|
10,667
|
|
|
|
|
|
|
|
|
|
|
|
|
Markets:
|
|
|
|
|
|
|
|
|
|
Banff Jasper Collection
|
|
$
|
9,799
|
|
|
$
|
7,870
|
|
|
Alaska Collection
|
|
|
151
|
|
|
|
180
|
|
|
Glacier Park Collection
|
|
|
723
|
|
|
|
823
|
|
|
FlyOver
|
|
|
2,850
|
|
|
|
1,794
|
|
|
Total revenue
|
|
$
|
13,523
|
|
|
$
|
10,667
|
|
Note 3. Share-Based Compensation
The following table summarizes share-based compensation (income) expense:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Performance unit incentive plan (“PUP”)(1)
|
|
$
|
(2,635
|
)
|
|
$
|
1,423
|
|
|
Restricted stock
|
|
|
650
|
|
|
|
693
|
|
|
Restricted stock units
|
|
|
(160
|
)
|
|
|
90
|
|
|
Share-based compensation (income) expense before income tax benefit
|
|
|
(2,145
|
)
|
|
|
2,206
|
|
|
Income tax benefit
|
|
|
(109
|
)
|
|
|
(558
|
)
|
|
Share-based compensation (income) expense, net of income tax benefit
|
|
$
|
(2,254
|
)
|
|
$
|
1,648
|
|
|
(1)
|
PUP awards are liability-based awards that are tied to our stock price and the expected achievement of certain performance-based criteria. During the three months ended March 31, 2020, the value of the PUP awards decreased due to the reduction of our estimated performance achievement and the decline in our stock price as a result of COVID-19.
|
14
The following table summarizes the activity of the outstanding share-based compensation awards:
|
|
|
PUP Awards
|
|
|
Restricted Stock
|
|
|
Restricted Stock Units
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair Value
|
|
|
Balance at December 31, 2019
|
|
|
214,904
|
|
|
$
|
52.53
|
|
|
|
136,123
|
|
|
$
|
52.66
|
|
|
|
11,623
|
|
|
$
|
52.17
|
|
|
Granted
|
|
|
84,898
|
|
|
$
|
56.15
|
|
|
|
47,742
|
|
|
$
|
55.91
|
|
|
|
3,391
|
|
|
$
|
55.24
|
|
|
Vested
|
|
|
(67,866
|
)
|
|
$
|
47.43
|
|
|
|
(61,475
|
)
|
|
$
|
50.02
|
|
|
|
(2,815
|
)
|
|
$
|
47.45
|
|
|
Forfeited
|
|
|
(595
|
)
|
|
$
|
58.79
|
|
|
|
(1,494
|
)
|
|
$
|
54.39
|
|
|
|
(760
|
)
|
|
$
|
56.88
|
|
|
Balance at March 31, 2020
|
|
|
231,341
|
|
|
$
|
55.34
|
|
|
|
120,896
|
|
|
$
|
55.26
|
|
|
|
11,439
|
|
|
$
|
53.93
|
|
Viad Corp Omnibus Incentive Plan
We grant share-based compensation awards to our officers, directors, and certain key employees pursuant to the 2017 Viad Corp Omnibus Incentive Plan (the “2017 Plan”). The 2017 Plan has a 10-year term and provides for the following types of awards: (a) incentive and non-qualified stock options; (b) restricted stock and restricted stock units; (c) performance units or performance shares; (d) stock appreciation rights; (e) cash-based awards; and (f) certain other stock-based awards. In June 2017, we registered 1,750,000 shares of common stock issuable under the 2017 Plan. As of March 31, 2020, there were 1,505,330 shares available for future grant under the 2017 Plan.
PUP Awards
The vesting of PUP award shares is based upon achievement of certain performance-based criteria over a three-year period.
During the three months ended March 31, 2020, we granted PUP awards with a grant date fair value of $4.8 million of which $1.8 million are payable in shares. Liabilities related to PUP awards were $0.4 million as of March 31, 2020 and $5.3 million as of December 31, 2019. In 2020, PUP awards granted in 2017 vested and we paid $2.6 million in cash. No PUP awards were paid in shares in 2020. In 2019, PUP awards granted in 2016 vested and we paid $5.6 million in cash and $3.4 million in shares. In 2019, we withheld 25,771 shares for $1.5 million related to tax withholding requirements on vested PUP awards paid in shares.
Restricted Stock
As of March 31, 2020, the unamortized cost of outstanding restricted stock awards was $4.4 million, which we expect to recognize over a weighted-average period of approximately 1.8 years. We repurchased 17,674 shares for $1.1 million during the three months ended March 31, 2020 and 24,067 shares for $1.4 million during the three months ended March 31, 2019 related to tax withholding requirements on vested share-based awards.
Restricted Stock Units
Aggregate liabilities related to restricted stock units were $0.1 million as of March 31, 2020 and $0.4 million as of December 31, 2019. During the three months ended March 31, 2020, restricted stock units vested and we paid $0.2 million in cash. During the three months ended March 31, 2019, restricted stock units vested and we paid $0.3 million in cash.
Stock Options
The following table summarizes stock option activity:
|
|
|
Shares
|
|
|
Weighted-Average
Exercise Price
|
|
|
Options outstanding and exercisable at December 31, 2019
|
|
|
41,143
|
|
|
$
|
16.62
|
|
|
Exercised
|
|
|
(41,143
|
)
|
|
$
|
16.62
|
|
|
Options outstanding and exercisable at March 31, 2020
|
|
|
—
|
|
|
$
|
—
|
|
15
Note 4. Acquisitions
2019 Acquisitions
Belton Chalet
On May 16, 2019, we acquired the Belton Chalet in Glacier National Park for total cash consideration of $3.2 million. Transaction costs associated with the acquisition were $0.3 million during 2019, which are included in “Cost of services” in the Consolidated Statements of Operations. We included these assets in the consolidated financial statements from the date of acquisition.
Mountain Park Lodges
On June 8, 2019, we acquired a 60% equity interest in Mountain Park Lodges’ group of seven hotels and an undeveloped land parcel located in Jasper National Park for total consideration of $100.6 million Canadian dollars (approximately $76 million U.S. dollars).
The seven Mountain Park Lodges properties include: Sawridge Inn and Conference Centre (152 guest rooms); Pyramid Lake Resort (62 guest rooms); The Crimson Hotel (99 guest rooms); Chateau Jasper (119 guest rooms); Pocahontas Cabins (57 guest rooms); Marmot Lodge (107 guest rooms); and Lobstick Lodge (139 guest rooms).
As the majority owner of these properties, we consolidate 100% of the results of operations in our consolidated financial statements and record the 40% owners’ share of the income or loss attributable to non-redeemable noncontrolling interest.
Transaction costs associated with the Mountain Park Lodges were $0.9 million in 2019, which are included in “Corporate activities” in the Consolidated Statements of Operations. We included these assets and results of operations in the consolidated financial statements from the date of acquisition. During the three months ended March 31, 2020, revenue related to the Mountain Park Lodges was $2.9 million and operating loss was $2.4 million.
Identifiable intangible assets acquired in the Mountain Park Lodges acquisition were $20.2 million and consist primarily of in-place leases, customer relationships, and trade names. The weighted average amortization period related to the intangible assets was approximately 30.8 years.
Pursuit – Sky Lagoon Attraction
On July 25, 2019, we announced plans for a new geothermal lagoon attraction that will be located on an oceanfront lot just outside downtown Reykjavik, Iceland. We acquired a 51% controlling interest for $13.2 million in the new entity that will manage the Pursuit Sky Lagoon attraction, which we will operate in partnership with Geothermal Lagoon ehf., the Icelandic entity that owns the lagoon assets. The noncontrolling interest’s carrying value was determined by the fair value of the noncontrolling interest as of the acquisition date and the noncontrolling interest’s share of the subsequent net income or loss. The amortization of the resulting operating contract intangible is not deductible for tax purposes. We expect to open our new attraction in 2021.
Supplementary pro forma financial information
The following table summarizes the unaudited pro forma results of operations attributable to Viad, assuming the completion of the Mountain Park Lodges acquisition was on January 1, 2019. We do not consider the Pursuit Sky Lagoon attraction or the Belton Chalet significant acquisitions and accordingly, they are not included in the following pro forma results of operations:
|
|
|
Three Months Ended
|
|
|
(in thousands, except per share data)
|
|
March 31, 2019
|
|
|
Revenue
|
|
$
|
289,476
|
|
|
Depreciation and amortization
|
|
$
|
14,508
|
|
|
Loss from continuing operations
|
|
$
|
(18,760
|
)
|
|
Net loss attributable to Viad
|
|
$
|
(18,228
|
)
|
|
Diluted loss per share(1)
|
|
$
|
(0.91
|
)
|
|
Basic loss per share
|
|
$
|
(0.91
|
)
|
|
(1)
|
Diluted loss per share amount cannot exceed basic loss per share.
|
16
Note 5. Inventories
We state inventories, which consist primarily of exhibit design and construction materials and supplies, as well as retail inventory, at the lower of cost (first-in, first-out and specific identification methods) or net realizable value.
The components of inventories consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Raw materials
|
|
$
|
11,895
|
|
|
$
|
11,788
|
|
|
Finished goods
|
|
|
5,633
|
|
|
|
5,481
|
|
|
Inventories
|
|
$
|
17,528
|
|
|
$
|
17,269
|
|
Note 6. Other Current Assets
Other current assets consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Income tax receivable
|
|
$
|
18,492
|
|
|
$
|
13,250
|
|
|
Prepaid software maintenance
|
|
|
5,110
|
|
|
|
3,875
|
|
|
Prepaid insurance
|
|
|
5,027
|
|
|
|
5,573
|
|
|
Prepaid vendor payments
|
|
|
3,852
|
|
|
|
4,698
|
|
|
Prepaid taxes
|
|
|
653
|
|
|
|
917
|
|
|
Prepaid other
|
|
|
3,753
|
|
|
|
1,904
|
|
|
Other
|
|
|
490
|
|
|
|
637
|
|
|
Other current assets
|
|
$
|
37,377
|
|
|
$
|
30,854
|
|
Note 7. Property and Equipment
Property and equipment consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Land and land interests
|
|
$
|
34,169
|
|
|
$
|
34,532
|
|
|
Buildings and leasehold improvements
|
|
|
361,971
|
|
|
|
377,754
|
|
|
Equipment and other
|
|
|
417,965
|
|
|
|
417,239
|
|
|
Gross property and equipment
|
|
|
814,105
|
|
|
|
829,525
|
|
|
Accumulated depreciation
|
|
|
(355,439
|
)
|
|
|
(353,974
|
)
|
|
Property and equipment, net (excluding finance leases)
|
|
|
458,666
|
|
|
|
475,551
|
|
|
Finance lease right-of-use assets, net
|
|
|
22,956
|
|
|
|
25,350
|
|
|
Property and equipment, net
|
|
$
|
481,622
|
|
|
$
|
500,901
|
|
Depreciation expense was $12.2 million for the three months ended March 31, 2020 and $10.1 million for the three months ended March 31, 2019.
Amortization expense on finance lease assets was $0.9 million for the three months ended March 31, 2020 and $0.6 million for the three months ended March 31, 2019.
Property and equipment purchased through accounts payable and accrued liabilities decreased $4.6 million during the three months ended March 31, 2020 and decreased $1.5 million during the three months ended March 31, 2019.
17
Note 8. Other Investments and Assets
Other investments and assets consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Cash surrender value of life insurance(1)
|
|
$
|
24,951
|
|
|
$
|
24,873
|
|
|
Self-insured liability receivable
|
|
|
9,982
|
|
|
|
9,982
|
|
|
Contract costs
|
|
|
4,760
|
|
|
|
3,961
|
|
|
Other mutual funds
|
|
|
2,633
|
|
|
|
3,107
|
|
|
Other
|
|
|
3,218
|
|
|
|
3,196
|
|
|
Other investments and assets
|
|
$
|
45,544
|
|
|
$
|
45,119
|
|
|
(1)
|
In May 2020, we terminated our life insurance policies and received cash proceeds of $24.8 million. Refer to Note 24 – Subsequent Events.
|
Note 9. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill are as follows:
|
(in thousands)
|
|
GES North America
|
|
|
GES EMEA
|
|
|
Pursuit
|
|
|
Total
|
|
|
Balance at December 31, 2019
|
|
$
|
155,276
|
|
|
$
|
30,829
|
|
|
$
|
101,878
|
|
|
$
|
287,983
|
|
|
Goodwill impairment
|
|
|
(41,887
|
)
|
|
|
(29,042
|
)
|
|
|
(1,757
|
)
|
|
|
(72,686
|
)
|
|
Foreign currency translation adjustments
|
|
|
(534
|
)
|
|
|
(1,787
|
)
|
|
|
(8,363
|
)
|
|
|
(10,684
|
)
|
|
Balance at March 31, 2020
|
|
$
|
112,855
|
|
|
$
|
—
|
|
|
$
|
91,758
|
|
|
$
|
204,613
|
|
Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 31, and between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. We use a discounted expected future cash flow methodology (income approach) in order to estimate the fair value of our reporting units for purposes of goodwill impairment testing.
In early March 2020, as a result of COVID-19 concerns, we began to see event postponements and cancellations at GES, as well as some cancelled bookings at Pursuit. This quickly escalated into the shut-down of event activity and tourism as government mandated closures and stay-at-home orders went more broadly into effect around the world. As demand halted, we essentially placed our businesses into a state of hibernation to preserve cash. As select areas of the global economy have begun to re-open, primarily at the discretion of local authorities, we are beginning to restart our business with enhanced health and safety protocols in place. On May 7, 2020, we re-opened FlyOver Iceland, and we have begun and expect to continue to re-open other Pursuit experiences in June as restrictions are eased. However, exhibition and event activity has yet to resume. For GES, we believe that as governments lift restrictions, events in certain geographies will start to take place again during the third quarter and we stand ready to reactivate areas of that business when it makes sense to do so.
During the three months ended March 31, 2020, we determined that an interim triggering event had occurred due to the deteriorating macroeconomic environment, disruptions to our operations, and the sustained decline in our stock price caused by COVID-19. As such, we performed an interim evaluation of goodwill as of March 31, 2020. As a result of the interim impairment test, we recorded non-cash goodwill impairment charges of $41.9 million associated with GES U.S., $29.0 million associated with GES EMEA, and $1.8 million associated with Pursuit’s Glacier Park Collection. We recorded an income tax benefit of $12.4 million related to these goodwill impairment charges.
Given the evolving, uncertain nature of COVID-19, and the uncertain government and consumer reactions, the estimates and assumptions regarding expected future cash flows, discount rates, and terminal values used in our goodwill impairment analysis require considerable judgment and are based on our current estimates of market conditions, financial forecasts, and industry trends. These estimates, however, have inherent uncertainties and different assumptions could lead to materially different results including additional impairment charges in the future.
18
Other intangible assets consisted of the following:
|
|
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
(in thousands)
|
|
Useful Life
(Years)
|
|
Gross Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying Value
|
|
|
Gross Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying Value
|
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts and relationships
|
|
6.6
|
|
$
|
39,395
|
|
|
$
|
(25,144
|
)
|
|
$
|
14,251
|
|
|
$
|
72,219
|
|
|
$
|
(40,866
|
)
|
|
$
|
31,353
|
|
|
Operating contracts and licenses
|
|
37.2
|
|
|
37,924
|
|
|
|
(1,757
|
)
|
|
|
36,167
|
|
|
|
43,329
|
|
|
|
(1,881
|
)
|
|
|
41,448
|
|
|
In-place lease
|
|
13.7
|
|
|
13,897
|
|
|
|
(280
|
)
|
|
|
13,617
|
|
|
|
15,044
|
|
|
|
(231
|
)
|
|
|
14,813
|
|
|
Tradenames
|
|
7.4
|
|
|
5,397
|
|
|
|
(1,688
|
)
|
|
|
3,709
|
|
|
|
9,423
|
|
|
|
(4,338
|
)
|
|
|
5,085
|
|
|
Non-compete agreements
|
|
1.8
|
|
|
697
|
|
|
|
(453
|
)
|
|
|
244
|
|
|
|
2,077
|
|
|
|
(1,775
|
)
|
|
|
302
|
|
|
Other
|
|
7.9
|
|
|
742
|
|
|
|
(70
|
)
|
|
|
672
|
|
|
|
802
|
|
|
|
(66
|
)
|
|
|
736
|
|
|
Total amortized intangible assets
|
|
|
|
|
98,052
|
|
|
|
(29,392
|
)
|
|
|
68,660
|
|
|
|
142,894
|
|
|
|
(49,157
|
)
|
|
|
93,737
|
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business licenses
|
|
|
|
|
562
|
|
|
|
—
|
|
|
|
562
|
|
|
|
571
|
|
|
|
—
|
|
|
|
571
|
|
|
Other intangible assets
|
|
|
|
$
|
98,614
|
|
|
$
|
(29,392
|
)
|
|
$
|
69,222
|
|
|
$
|
143,465
|
|
|
$
|
(49,157
|
)
|
|
$
|
94,308
|
|
Intangible asset amortization expense was $2.2 million for the three months ended March 31, 2020 and $2.5 million for the three months ended March 31, 2019. We recorded an impairment charge to intangible assets of $15.7 million during the three months ended March 31, 2020 related to our U.S. audio-visual production business.
At March 31, 2020, the estimated future amortization expense related to intangible assets subject to amortization is as follows:
|
(in thousands)
|
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
|
Remainder of 2020
|
|
$
|
4,305
|
|
|
2021
|
|
|
4,948
|
|
|
2022
|
|
|
4,832
|
|
|
2023
|
|
|
4,203
|
|
|
2024
|
|
|
3,282
|
|
|
Thereafter
|
|
|
47,090
|
|
|
Total
|
|
$
|
68,660
|
|
The duration and impact of COVID-19 may result in additional future impairment charges as facts and circumstances evolve.
19
Note 10. Other Current Liabilities
Other current liabilities consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
Accrued sales and use taxes
|
|
$
|
7,751
|
|
|
$
|
5,451
|
|
|
Commissions payable
|
|
|
7,450
|
|
|
|
8,274
|
|
|
Accrued employee benefit costs
|
|
|
6,249
|
|
|
|
3,564
|
|
|
Self-insured liability
|
|
|
6,001
|
|
|
|
5,668
|
|
|
Accommodation services deposits
|
|
|
5,863
|
|
|
|
959
|
|
|
Accrued dividends
|
|
|
2,023
|
|
|
|
2,019
|
|
|
Current portion of pension and postretirement liabilities
|
|
|
1,722
|
|
|
|
1,899
|
|
|
Accrued restructuring
|
|
|
1,705
|
|
|
|
2,130
|
|
|
Accrued legal settlement
|
|
|
1,250
|
|
|
|
2,500
|
|
|
Accrued professional fees
|
|
|
1,125
|
|
|
|
1,248
|
|
|
Other taxes
|
|
|
542
|
|
|
|
278
|
|
|
Other
|
|
|
4,398
|
|
|
|
5,187
|
|
|
Total continuing operations
|
|
|
46,079
|
|
|
|
39,177
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
Self-insured liability
|
|
|
386
|
|
|
|
260
|
|
|
Environmental remediation liabilities
|
|
|
206
|
|
|
|
311
|
|
|
Other
|
|
|
79
|
|
|
|
76
|
|
|
Total discontinued operations
|
|
|
671
|
|
|
|
647
|
|
|
Total other current liabilities
|
|
$
|
46,750
|
|
|
$
|
39,824
|
|
Note 11. Other Deferred Items and Liabilities
Other deferred items and liabilities consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
Foreign deferred tax liability
|
|
$
|
27,374
|
|
|
$
|
32,570
|
|
|
Multi-employer pension plan withdrawal liability
|
|
|
15,508
|
|
|
|
15,693
|
|
|
Self-insured excess liability
|
|
|
9,982
|
|
|
|
9,982
|
|
|
Self-insured liability
|
|
|
8,314
|
|
|
|
8,682
|
|
|
Accrued compensation
|
|
|
4,409
|
|
|
|
7,485
|
|
|
Accrued restructuring
|
|
|
2,250
|
|
|
|
2,383
|
|
|
Contract liabilities
|
|
|
1,418
|
|
|
|
125
|
|
|
Other
|
|
|
2,206
|
|
|
|
2,423
|
|
|
Total continuing operations
|
|
|
71,461
|
|
|
|
79,343
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
Environmental remediation liabilities
|
|
|
2,125
|
|
|
|
1,964
|
|
|
Self-insured liability
|
|
|
1,778
|
|
|
|
2,018
|
|
|
Other
|
|
|
379
|
|
|
|
382
|
|
|
Total discontinued operations
|
|
|
4,282
|
|
|
|
4,364
|
|
|
Total other deferred items and liabilities
|
|
$
|
75,743
|
|
|
$
|
83,707
|
|
20
Note 12. Debt and Finance Lease Obligations
The components of long-term debt and finance lease obligations consisted of the following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands, except interest rates)
|
|
2020
|
|
|
2019
|
|
|
2018 Credit Facility, 3.1% weighted-average interest rate at March 31, 2020 and 3.9% at December 31, 2019, due through 2023(1)
|
|
$
|
412,551
|
|
|
$
|
311,464
|
|
|
|
FlyOver Iceland Credit Facility, 4.9% weighted-average interest rate at March 31, 2020 and December 31, 2019, due through 2022(1)
|
|
|
5,254
|
|
|
|
5,607
|
|
|
|
Less unamortized debt issuance costs
|
|
|
(1,708
|
)
|
|
|
(1,836
|
)
|
|
Total debt (2)
|
|
|
416,097
|
|
|
|
315,235
|
|
|
Finance lease obligations, 7.8% weighted-average interest rate at March 31, 2020 and December 31, 2019, due through 2021
|
|
|
22,749
|
|
|
|
25,257
|
|
|
|
Total debt and finance lease obligations (3)
|
|
|
438,846
|
|
|
|
340,492
|
|
|
Current portion (4)(5)
|
|
|
(420,830
|
)
|
|
|
(5,330
|
)
|
|
Long-term debt and finance lease obligations
|
|
$
|
18,016
|
|
|
$
|
335,162
|
|
|
(1)
|
Represents the weighted-average interest rate in effect at the respective periods, including any applicable margin. The interest rates do not include amortization of debt issuance costs or commitment fees.
|
|
(2)
|
The estimated fair value of total debt and finance leases was $430.1 million as of March 31, 2020 and $339.4 million as of December 31, 2019. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity, which is a Level 2 measurement. Refer to Note 13 – Fair Value Measurements.
|
|
(3)
|
Cash paid for interest on debt was $3.5 million for the three months ended March 31, 2020 and $2.7 million for the three months ended March 31, 2019.
|
|
(4)
|
Subsequent to the filing of our 2019 Form 10-K, we identified a correction related to the classification of the 2018 Credit Facility (as defined below) from current to long-term given that the 2018 Credit Facility’s contractual maturity is not within 12 months of the balance sheet date, and we were in compliance with all applicable covenants as of December 31, 2019. As a result, we corrected the classification of the debt on the accompanying condensed consolidated balance sheet and the disclosure related to classification of debt in the table above as of December 31, 2019 to present the 2018 Credit Facility as long-term. Except for this change, the correction had no impact upon this Quarterly Report on Form 10-Q. We determined that the error is not material to the previously issued financial statements.
|
|
(5)
|
As discussed below, in May 2020, we entered into an amendment to our 2018 Credit Agreement (as defined below), which waived our financial covenants for the quarter ending June 30, 2020. However, we expect to be unable to meet our financial covenants beginning with the quarter ending September 30, 2020, and as a result, the entire $412.6 million balance outstanding under the 2018 Credit Facility as of March 31, 2020 has been classified as a current liability. We are actively negotiating with our lenders to further amend our 2018 Credit Agreement; however, we cannot provide any assurance regarding our ability to obtain further amendments to the 2018 Credit Agreement in a timely manner, or on acceptable terms, if at all. If we are unable to obtain a waiver to our financial covenants, our lenders may exercise remedies against us, including the acceleration of our outstanding indebtedness We also expect to be unable to meet our financial covenants under our FlyOver Iceland Credit Facility beginning with the quarter ending September 30, 2020, and as a result, the $5.3 million balance outstanding as of March 31, 2020 has been classified as a current liability.
|
2018 Credit Agreement
Effective October 24, 2018, we entered into a Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”). The 2018 Credit Agreement has a maturity date of October 24, 2023 and provides for a $450 million revolving credit facility (“2018 Credit Facility”). Proceeds from the 2018 Credit Facility were used to refinance certain of our outstanding debt and provide us with additional funds for our operations, growth initiatives, acquisitions, and other general corporate purposes in the ordinary course of business. The 2018 Credit Facility may be increased up to an additional $250 million under certain circumstances and has a $20 million sublimit for letters of credit. Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Our lenders under the 2018 Credit Facility have a first perfected security interest in all of our personal property including GES, GES Event Intelligence Services, Inc., CATC Alaska Tourism Corporation (“CATC”), ON Event Services, LLC (“ON Services”), and 65% of the capital stock of our top-tier foreign subsidiaries (other than Esja). Financial covenants include an interest coverage ratio of not less than 3.00 to 1.00 and a leverage ratio of not greater than 3.50 to 1.00, with a step-up to 4.00 to 1.00 for four quarters following a material acquisition of $50 million or more. Dividends are permitted up to $15 million in any calendar year. In addition, we can declare and pay dividends or repurchase our common stock up to $20 million per calendar year. Dividends and repurchases above those thresholds are permitted as long as our pro forma leverage ratio is less than or equal to 2.75 to 1.00.
21
Unsecured debt is allowed provided we are in compliance with the leverage ratio. In addition, the unsecured debt must mature after the expiration of the 2018 Credit Facility, cannot have scheduled principal payments while the 2018 Credit Facility is in place, and any covenants for unsecured debt cannot be more restrictive than the 2018 Credit Facility. Significant other covenants include limitations on investments, additional indebtedness, sales and dispositions of assets, and liens on property. As of March 31, 2020, the interest coverage ratio was 9.16 to 1.00, the leverage ratio was 3.13 to 1.00, and we were in compliance with all covenants under the 2018 Credit Agreement.
Effective July 23, 2019, we entered into an amendment (“Amendment No. 1”) to the 2018 Credit Agreement. Amendment No.1 modified the terms related to the withdrawal liabilities of single and multi-employer ERISA plans.
Effective May 8, 2020, we entered into an amendment (“Amendment No. 2”) to the 2018 Credit Agreement. Amendment No. 2, which among other things, waived our financial covenants for the quarter ending June 30, 2020 under the 2018 Credit Agreement and added a new minimum liquidity requirement; however, we expect to be unable to meet our financial covenants beginning with the quarter ending September 30, 2020. Refer to Note 1 – Overview and Basis of Presentation (Impact of COVID-19 and Going Concern) and Note 24 – Subsequent Events for additional information.
We index borrowings under the 2018 Credit Facility (of which GES, GES Event Intelligence Services, Inc., CATC, and ON Services are guarantors) to the prime rate or the London Interbank Offered Rate (“LIBOR”), plus appropriate spreads tied to our leverage ratio. As LIBOR will be phased out in 2021, our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that considers the new prevailing market convention. The vast majority of our borrowings under the 2018 Credit Facility are indexed to LIBOR. Commitment fees and letters of credit fees are also tied to our leverage ratio. The fees on the unused portion of the 2018 Credit Facility were 0.35% annually as of March 31, 2020. We index only our borrowings under the 2018 Credit Facility and the discount rates we use to account for some leases to LIBOR. We do not expect the alternative or successor rate to LIBOR to have a material impact on either our 2018 Credit Facility or the accounting for our leases.
On March 17, 2020, we borrowed $123.0 million under the 2018 Credit Facility as a proactive measure to increase our cash position and preserve financial flexibility due to uncertainty in the global markets resulting from the COVID-19 outbreak.
As of March 31, 2020, capacity remaining under the 2018 Credit Facility was $33.8 million, reflecting borrowings of $412.6 million and $3.6 million in outstanding letters of credit. In early April 2020, we borrowed $31 million under the 2018 Credit Facility.
FlyOver Iceland Credit Facility
Effective February 15, 2019, FlyOver Iceland ehf., a wholly-owned subsidiary of Esja, entered into a credit agreement with a €5.0 million (approximately $5.6 million U.S. dollars) credit facility (the “FlyOver Iceland Credit Facility”) with a maturity date of March 1, 2022. We used the loan proceeds to complete the development of the FlyOver Iceland attraction. In response to COVID-19, we entered into an addendum to the FlyOver Iceland Credit Facility effective May 14, 2020 wherein the principal and interest payments will be deferred for six months beginning June 1, 2020, with the first payment due December 1, 2020. The addendum also extended the maturity date to September 1, 2022. There were no other changes to the terms of the FlyOver Iceland Credit Facility. We expect to be unable to meet our financial covenants under our FlyOver Iceland Credit Facility beginning with the quarter ending September 30, 2020.
22
Note 13. Fair Value Measurements
The fair value of an asset or liability is defined as the price that would be received by selling an asset or paying to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance requires an entity to maximize the use of quoted prices and other observable inputs and minimize the use of unobservable inputs when measuring fair value, and also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value.
Money market mutual funds and certain other mutual fund investments are measured at fair value on a recurring basis using Level 1 inputs. The fair value information related to these assets is summarized in the following tables:
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
(in thousands)
|
|
March 31, 2020
|
|
|
Quoted Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1)
|
|
$
|
77,125
|
|
|
$
|
77,125
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other mutual funds (2)
|
|
|
2,633
|
|
|
|
2,633
|
|
|
|
—
|
|
|
|
—
|
|
|
Total assets at fair value on a recurring basis
|
|
$
|
79,758
|
|
|
$
|
79,758
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
(in thousands)
|
|
December 31, 2019
|
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1)
|
|
$
|
123
|
|
|
$
|
123
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other mutual funds (2)
|
|
|
3,107
|
|
|
|
3,107
|
|
|
|
—
|
|
|
|
—
|
|
|
Total assets at fair value on a recurring basis
|
|
$
|
3,230
|
|
|
$
|
3,230
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
We include money market funds in “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. We classify these investments as available-for-sale and record them at fair value. There have been no realized gains or losses related to these investments and we have not experienced any redemption restrictions with respect to any of the money market mutual funds. A portion of the funds borrowed during the three months ended March 31, 2020 under the 2018 Credit Facility were deposited into money market funds. Refer to Note 12 – Debt and Finance Lease Obligations for additional information.
|
|
(2)
|
We include other mutual funds in “Other investments and assets” in the Condensed Consolidated Balance Sheets.
|
The carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term nature of these instruments. Refer to Note 12 – Debt and Finance Lease Obligations for the estimated fair value of debt obligations.
23
Note 14. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (“AOCI”) by component are as follows:
|
(in thousands)
|
|
Cumulative
Foreign Currency Translation Adjustments
|
|
|
Unrecognized Net Actuarial Loss and Prior Service Credit, Net
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Balance at December 31, 2019
|
|
$
|
(23,799
|
)
|
|
$
|
(11,900
|
)
|
|
$
|
(35,699
|
)
|
|
Other comprehensive loss before reclassifications
|
|
|
(28,158
|
)
|
|
|
—
|
|
|
|
(28,158
|
)
|
|
Amounts reclassified from AOCI, net of tax
|
|
|
—
|
|
|
|
314
|
|
|
|
314
|
|
|
Net other comprehensive income (loss)
|
|
|
(28,158
|
)
|
|
|
314
|
|
|
|
(27,844
|
)
|
|
Balance at March 31, 2020
|
|
$
|
(51,957
|
)
|
|
$
|
(11,586
|
)
|
|
$
|
(63,543
|
)
|
|
(in thousands)
|
|
Cumulative
Foreign Currency Translation Adjustments
|
|
|
Unrecognized Net Actuarial Loss and Prior Service Credit, Net
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Balance at December 31, 2018
|
|
$
|
(36,332
|
)
|
|
$
|
(11,643
|
)
|
|
$
|
(47,975
|
)
|
|
Other comprehensive income before reclassifications
|
|
|
4,780
|
|
|
|
—
|
|
|
|
4,780
|
|
|
Amounts reclassified from AOCI, net of tax
|
|
|
—
|
|
|
|
85
|
|
|
|
85
|
|
|
Net other comprehensive income
|
|
|
4,780
|
|
|
|
85
|
|
|
|
4,865
|
|
|
Balance at March 31, 2019
|
|
$
|
(31,552
|
)
|
|
$
|
(11,558
|
)
|
|
$
|
(43,110
|
)
|
Amounts reclassified that relate to our defined benefit pension and postretirement plans include the amortization of prior service costs and actuarial net losses recognized during each period presented. We recorded these costs as components of net periodic cost for each period presented. Refer to Note 17 – Pension and Postretirement Benefits for additional information.
Note 15. Loss Per Share
The components of basic and diluted income per share are as follows:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands, except per share data)
|
|
2020
|
|
|
2019
|
|
|
Net loss attributable to Viad (diluted)
|
|
$
|
(86,585
|
)
|
|
$
|
(17,777
|
)
|
|
Less: Allocation to non-vested shares
|
|
|
—
|
|
|
|
—
|
|
|
Adjustment to the redemption value of redeemable noncontrolling interest
|
|
|
(126
|
)
|
|
|
(87
|
)
|
|
Net loss allocated to Viad common stockholders (basic)
|
|
$
|
(86,711
|
)
|
|
$
|
(17,864
|
)
|
|
Basic weighted-average outstanding common shares
|
|
|
20,215
|
|
|
|
20,076
|
|
|
Additional dilutive shares related to share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
Diluted weighted-average outstanding shares
|
|
|
20,215
|
|
|
|
20,076
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
Basic loss attributable to Viad common stockholders
|
|
$
|
(4.29
|
)
|
|
$
|
(0.89
|
)
|
|
Diluted loss attributable to Viad common stockholders(1)
|
|
$
|
(4.29
|
)
|
|
$
|
(0.89
|
)
|
|
(1)
|
Diluted loss per share amount cannot exceed basic loss per share.
|
Note 16. Income Taxes
The effective tax rate was 15.2% for the three months ended March 31, 2020 and 29.8% for the three months ended March 31, 2019.
The income tax provision was computed based on our estimated annualized effective tax rate and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period. The effective tax rate for the three months ended March 31, 2020 was less than the federal statutory rate of 21% primarily due to no tax benefit recognized on some of the impairments recorded on goodwill (see Note 9 – Goodwill and Intangible Assets). The effective tax rate for the three months ended March 31, 2019 was more than the federal statutory rate primarily due to foreign losses taxed at higher rates, equity
24
compensation vested during the quarter, and the tax benefit of a legal settlement that was treated as an unusual item and not included in the annualized tax rate calculation.
Net cash paid for income taxes was $3.3 million for the three months ended March 31, 2020 and $3.4 million for the three months ended March 31, 2019.
Note 17. Pension and Postretirement Benefits
The components of net periodic benefit cost of our pension and postretirement benefit plans for the three months ended March 31, 2020 and 2019 consist of the following:
|
|
|
Domestic Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Postretirement Benefit Plans
|
|
|
Foreign Pension Plans
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
15
|
|
|
$
|
20
|
|
|
$
|
110
|
|
|
$
|
101
|
|
|
Interest cost
|
|
|
160
|
|
|
|
214
|
|
|
|
88
|
|
|
|
124
|
|
|
|
84
|
|
|
|
94
|
|
|
Expected return on plan assets
|
|
|
(1
|
)
|
|
|
(34
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(131
|
)
|
|
|
(122
|
)
|
|
Amortization of prior service credit
|
|
|
—
|
|
|
|
—
|
|
|
|
(36
|
)
|
|
|
(47
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Recognized net actuarial loss
|
|
|
135
|
|
|
|
106
|
|
|
|
82
|
|
|
|
77
|
|
|
|
46
|
|
|
|
38
|
|
|
Net periodic benefit cost
|
|
$
|
294
|
|
|
$
|
301
|
|
|
$
|
149
|
|
|
$
|
174
|
|
|
$
|
109
|
|
|
$
|
111
|
|
We expect to contribute $1.4 million to our funded pension plans, $0.9 million to our unfunded pension plans, and $1.0 million to our postretirement benefit plans in 2019. During the three months ended March 31, 2020, we contributed $0.1 million to our funded pension plans, $0.2 million to our unfunded pension plans, and $0.2 million to our postretirement benefit plans.
Note 18. Restructuring Charges
GES
As part of our efforts to drive efficiencies and simplify our business operations, we took certain restructuring actions designed to reduce our cost structure primarily within GES. During 2020, we completed some strategic simplification actions, including the elimination of certain positions primarily in the United Kingdom.
Other Restructurings
We recorded restructuring charges in connection with the consolidation of certain support functions at our corporate headquarters. These charges primarily consist of severance and related benefits due to headcount reductions and charges related to the downsizing of facilities.
Changes to the restructuring liability by major restructuring activity are as follows:
|
|
|
GES
|
|
|
Other Restructurings
|
|
|
|
|
|
|
(in thousands)
|
|
Severance &
Employee
Benefits
|
|
|
Facilities
|
|
|
Severance &
Employee
Benefits
|
|
|
Total
|
|
|
Balance at December 31, 2019
|
|
$
|
2,935
|
|
|
$
|
1,339
|
|
|
$
|
239
|
|
|
$
|
4,513
|
|
|
Restructuring charges
|
|
|
664
|
|
|
|
(8
|
)
|
|
|
195
|
|
|
|
851
|
|
|
Cash payments
|
|
|
(808
|
)
|
|
|
(223
|
)
|
|
|
(262
|
)
|
|
|
(1,293
|
)
|
|
Adjustment to liability
|
|
|
(80
|
)
|
|
|
(46
|
)
|
|
|
10
|
|
|
|
(116
|
)
|
|
Balance at March 31, 2020
|
|
$
|
2,711
|
|
|
$
|
1,062
|
|
|
$
|
182
|
|
|
$
|
3,955
|
|
As of March 31, 2020, we expect to pay all but $1.5 million of the liabilities related to severance and employee benefits by the end of 2020. The liability related to future lease payments will be paid over the remaining lease terms. Refer to Note 22 – Segment Information, for information regarding restructuring charges by segment.
25
Note 19. Leases and Other
The balance sheet presentation of our operating and finance leases is as follows:
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
(in thousands)
|
|
Classification on the Condensed Consolidated Balance Sheet
|
|
2020
|
|
|
2019
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease assets
|
|
Operating lease right-of-use assets
|
|
$
|
96,719
|
|
|
$
|
103,314
|
|
|
Finance lease assets
|
|
Property and equipment, net
|
|
|
22,956
|
|
|
|
25,350
|
|
|
Total lease assets
|
|
|
|
$
|
119,675
|
|
|
$
|
128,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
Operating lease obligations
|
|
$
|
20,708
|
|
|
$
|
22,180
|
|
|
Finance lease obligations
|
|
Current portion of debt and finance lease obligations
|
|
|
3,025
|
|
|
|
3,386
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
Long-term operating lease obligations
|
|
|
78,685
|
|
|
|
82,851
|
|
|
Finance lease obligations
|
|
Long-term debt and finance lease obligations
|
|
|
19,724
|
|
|
|
21,871
|
|
|
Total lease liabilities
|
|
|
|
$
|
122,142
|
|
|
$
|
130,288
|
|
The components of lease expense consisted of the following:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
918
|
|
|
$
|
589
|
|
|
Interest on lease liabilities
|
|
|
417
|
|
|
|
67
|
|
|
Operating lease cost
|
|
|
6,727
|
|
|
|
5,992
|
|
|
Short-term lease cost
|
|
|
310
|
|
|
|
215
|
|
|
Variable lease cost
|
|
|
1,699
|
|
|
|
1,815
|
|
|
Sublease income(1)
|
|
|
—
|
|
|
|
(172
|
)
|
|
Total lease cost, net
|
|
$
|
10,071
|
|
|
$
|
8,506
|
|
(1) Sublease income excludes rental income from owned assets, which is recorded in revenue.
Other information related to operating and finance leases are as follows:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
6,529
|
|
|
$
|
6,198
|
|
|
Operating cash flows from finance leases
|
|
$
|
160
|
|
|
$
|
67
|
|
|
Financing cash flows from finance leases
|
|
$
|
777
|
|
|
$
|
522
|
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
779
|
|
|
$
|
11,439
|
|
|
Finance leases
|
|
$
|
730
|
|
|
$
|
1,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Weighted-average remaining lease term (years):
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
8.21
|
|
|
|
8.17
|
|
|
Finance leases
|
|
|
13.24
|
|
|
|
14.01
|
|
|
Weighted-average discount rate:
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
5.74
|
%
|
|
|
5.77
|
%
|
|
Finance leases
|
|
|
7.77
|
%
|
|
|
7.73
|
%
|
26
As of March 31, 2020, the estimated future minimum lease payments under non-cancellable leases, excluding variable leases and variable non-lease components, are as follows:
|
(in thousands)
|
|
Operating Leases
|
|
|
Finance Leases
|
|
|
Total
|
|
|
Remainder of 2020
|
|
$
|
18,496
|
|
|
$
|
3,680
|
|
|
$
|
22,176
|
|
|
2021
|
|
|
19,571
|
|
|
|
4,181
|
|
|
|
23,752
|
|
|
2022
|
|
|
16,152
|
|
|
|
3,687
|
|
|
|
19,839
|
|
|
2023
|
|
|
13,159
|
|
|
|
3,166
|
|
|
|
16,325
|
|
|
2024
|
|
|
9,959
|
|
|
|
2,468
|
|
|
|
12,427
|
|
|
Thereafter
|
|
|
54,919
|
|
|
|
22,550
|
|
|
|
77,469
|
|
|
Total future lease payments
|
|
|
132,256
|
|
|
|
39,732
|
|
|
|
171,988
|
|
|
Less: Amount representing interest
|
|
|
(32,863
|
)
|
|
|
(16,983
|
)
|
|
|
(49,846
|
)
|
|
Present value of minimum lease payments
|
|
|
99,393
|
|
|
|
22,749
|
|
|
|
122,142
|
|
|
Current portion
|
|
|
20,708
|
|
|
|
3,025
|
|
|
|
23,733
|
|
|
Long-term portion
|
|
$
|
78,685
|
|
|
$
|
19,724
|
|
|
$
|
98,409
|
|
As of March 31, 2020, the estimated future minimum rentals under non-cancellable leases, which includes rental income from facilities that we own, are as follows:
|
(in thousands)
|
|
|
|
|
|
Remainder of 2020
|
|
$
|
1,516
|
|
|
2021
|
|
|
1,839
|
|
|
2022
|
|
|
1,515
|
|
|
2023
|
|
|
1,329
|
|
|
2024
|
|
|
1,091
|
|
|
Thereafter
|
|
|
4,789
|
|
|
Total minimum rents
|
|
$
|
12,079
|
|
Leases Not Yet Commenced
As of March 31, 2020, we had executed certain facility and land leases for which we did not have control of the underlying assets. Accordingly, we did not record the lease liabilities and right-of-use assets on our Condensed Consolidated Balance Sheets. These leases include future planned attractions for Pursuit that are currently in the planning or development phase and that we expect the lease commencement dates to begin between fiscal years 2021 and 2022 with lease terms of 15 to 47 years.
Note 20. Litigation, Claims, Contingencies, and Other
We are plaintiffs or defendants to various actions, proceedings, and pending claims, some of which involve, or may involve, compensatory, punitive, or other damages. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings, or claims could be decided against us. During the three months ended March 31, 2019, we recorded an $8.5 million charge to resolve a legal dispute at GES involving a former industry contractor. Although the amount of liability as of March 31, 2020 with respect to unresolved legal matters is not ascertainable, we believe that any resulting liability, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our business, financial position, or results of operations.
We are subject to various U.S. federal, state, and foreign laws and regulations governing the prevention of pollution and the protection of the environment in the jurisdictions in which we have or had operations. If we fail to comply with these environmental laws and regulations, civil and criminal penalties could be imposed, and we could become subject to regulatory enforcement actions in the form of injunctions and cease and desist orders. As is the case with many companies, we also face exposure to actual or potential claims and lawsuits involving environmental matters relating to our past operations. As of March 31, 2020, we had recorded environmental remediation liabilities of $2.3 million related to previously sold operations. Although we are a party to certain environmental disputes, we believe that any resulting liabilities, after taking into consideration amounts already provided for and insurance coverage, will not have a material effect on our financial position or results of operations.
As of March 31, 2020, on behalf of our subsidiaries, we had certain obligations under guarantees to third parties. These guarantees are not subject to liability recognition in the condensed consolidated financial statements and relate to leased facilities and equipment leases entered into by our subsidiary operations. We would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that we would be required to make under all guarantees existing as of March 31, 2020 would be $75.3
27
million. These guarantees relate to our leased equipment and facilities through January 2040. There are no recourse provisions that would enable us to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements pursuant to which we could recover payments.
A significant number of our employees are unionized and we are a party to approximately 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If we are unable to reach an agreement with a union during the collective-bargaining process, the union may call for a strike or work stoppage, which may, under certain circumstances, adversely impact our business and results of operations. We believe that relations with our employees are satisfactory and that collective-bargaining agreements expiring in 2020 will be renegotiated in the ordinary course of business. Although our labor relations are currently stable, disruptions could occur, with the possibility of an adverse impact on the operating results of GES. During the three months ended June 30, 2019, we finalized the terms of a new collective-bargaining agreement with the Teamsters Local 727 union. The terms included a withdrawal from the underfunded Central States Pension Plan. Accordingly, we recorded a charge of $15.5 million, which represents the estimated present value of future contributions we will be required to make to the plan as a result of this withdrawal and $0.2 million of other withdrawal costs.
We are self-insured up to certain limits for workers’ compensation and general liabilities, which includes automobile, product general liability, and client property loss claims. The aggregate amount of insurance liabilities (up to our retention limit) related to our continuing operations was $14.3 million as of March 31, 2020, which includes $9.8 million related to workers’ compensation liabilities, and $4.5 million related to general liability claims. We have also retained and provided for certain workers’ compensation insurance liabilities in conjunction with previously sold businesses of $2.2 million as of March 31, 2020. We are also self-insured for certain employee health benefits and the estimated employee health benefit claims incurred but not yet reported was $1.5 million as of March 31, 2020. Provisions for losses for claims incurred, including actuarially derived estimated claims incurred but not yet reported, are made based on our historical experience, claims frequency, and other factors. A change in the assumptions used could result in an adjustment to recorded liabilities. We have purchased insurance for amounts in excess of the self-insured levels, which generally range from $0.2 million to $0.5 million on a per claim basis. We do not maintain a self-insured retention pool fund as claims are paid from current cash resources at the time of settlement. Our net cash payments in connection with these insurance liabilities were $1.5 million for the three months ended March 31, 2020 and $1.8 million for the three months ended March 31, 2019.
In addition, as of March 31, 2020, we have recorded insurance liabilities of $10.0 million related to continuing operations, which represents the amount for which we remain the primary obligor after self-insured insurance limits, without taking into consideration the above-referenced insurance coverage. Of this total, $6.5 million related to workers’ compensation liabilities and $3.5 million related to general/auto liability claims, which are recorded in other deferred items and liabilities in the Condensed Consolidated Balance Sheets with a corresponding receivable in other investments.
Note 21. Redeemable Noncontrolling Interest
On November 3, 2017, we acquired the controlling interest (54.5% of the common stock) in Esja, a private corporation in Reykjavik, Iceland. Through Esja and its wholly-owned subsidiary, we are operating a new FlyOver Iceland attraction.
The minority Esja shareholders have the right to sell (or “put”) their Esja shares to us based on a multiple of 5.0x EBITDA as calculated on the trailing 12 months from the most recently completed quarter before the put option exercise. The put option is only exercisable after 36 months of business operation (the “Reference Date”) and if the FlyOver Iceland attraction has earned a minimum of €3.25 million in unadjusted EBITDA during the most recent fiscal year and during the trailing 12-month period prior to exercise (the “Put Option Condition”). The put option is exercisable during a period of 12 months following the Reference Date (the “Option Period”) if the Put Option Condition has been met. If the Put Option Condition has not been met during the first Option Period, the Reference Date will be extended for an additional 12 months up to three times. If after 72 months, the FlyOver Iceland attraction has not achieved the Put Option Condition, the put option expires. If the Put Option Condition is met during any of the Option Periods, yet the shares are not exercised prior to the end of the 12-month Option Period, the put option will expire.
The noncontrolling interest’s carrying value is determined by the fair value of the noncontrolling interest as of the acquisition date and the noncontrolling interest’s share of the subsequent net income or loss. This value is benchmarked against the redemption value of the sellers’ put option. The carrying value is adjusted to the redemption value, provided that it does not fall below the initial carrying value, as determined by the purchase price allocation. We have made a policy election to reflect any changes caused by such an adjustment to retained earnings, rather than to current earnings.
28
Changes in the redeemable noncontrolling interest are as follows:
|
(in thousands)
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$
|
6,172
|
|
|
Net loss attributable to redeemable noncontrolling interest
|
|
|
(517
|
)
|
|
Adjustment to the redemption value
|
|
|
126
|
|
|
Foreign currency translation adjustment
|
|
|
(873
|
)
|
|
Balance at March 31, 2020
|
|
$
|
4,908
|
|
Note 22. Segment Information
We measure the profit and performance of our operations on the basis of segment operating income (loss), which excludes restructuring charges and recoveries and impairment charges. Intersegment sales are eliminated in consolidation and intersegment transfers are not significant. Corporate activities include expenses not allocated to operations. Depreciation and amortization and share-based compensation expense are the only significant non-cash items for the reportable segments.
Our reportable segments, with reconciliations to consolidated totals, are as follows:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
GES:
|
|
|
|
|
|
|
|
|
|
GES North America
|
|
$
|
251,758
|
|
|
$
|
223,241
|
|
|
GES EMEA
|
|
|
42,716
|
|
|
|
54,376
|
|
|
Intersegment eliminations
|
|
|
(1,989
|
)
|
|
|
(2,690
|
)
|
|
Total GES
|
|
|
292,485
|
|
|
|
274,927
|
|
|
Pursuit
|
|
|
13,523
|
|
|
|
10,667
|
|
|
Total revenue
|
|
$
|
306,008
|
|
|
$
|
285,594
|
|
|
Segment operating income (loss):
|
|
|
|
|
|
|
|
|
|
GES:
|
|
|
|
|
|
|
|
|
|
GES North America
|
|
$
|
11,966
|
|
|
$
|
608
|
|
|
GES EMEA
|
|
|
(1,108
|
)
|
|
|
1,135
|
|
|
Total GES
|
|
|
10,858
|
|
|
|
1,743
|
|
|
Pursuit
|
|
|
(20,274
|
)
|
|
|
(12,995
|
)
|
|
Segment operating loss
|
|
|
(9,416
|
)
|
|
|
(11,252
|
)
|
|
Corporate eliminations (1)
|
|
|
16
|
|
|
|
16
|
|
|
Corporate activities
|
|
|
(789
|
)
|
|
|
(1,833
|
)
|
|
Operating loss
|
|
|
(10,189
|
)
|
|
|
(13,069
|
)
|
|
Interest income
|
|
|
79
|
|
|
|
98
|
|
|
Interest expense
|
|
|
(4,018
|
)
|
|
|
(2,915
|
)
|
|
Other expense
|
|
|
(419
|
)
|
|
|
(455
|
)
|
|
Restructuring recoveries (charges):
|
|
|
|
|
|
|
|
|
|
GES North America
|
|
|
79
|
|
|
|
17
|
|
|
GES EMEA
|
|
|
(735
|
)
|
|
|
(662
|
)
|
|
Pursuit
|
|
|
(1
|
)
|
|
|
—
|
|
|
Corporate
|
|
|
(194
|
)
|
|
|
(43
|
)
|
|
Impairment charges:
|
|
|
|
|
|
|
|
|
|
GES North America
|
|
|
(57,581
|
)
|
|
|
—
|
|
|
GES EMEA
|
|
|
(29,042
|
)
|
|
|
—
|
|
|
Pursuit
|
|
|
(1,757
|
)
|
|
|
—
|
|
|
Legal settlement:
|
|
|
|
|
|
|
|
|
|
GES
|
|
|
—
|
|
|
|
(8,500
|
)
|
|
Loss from continuing operations before income taxes
|
|
$
|
(103,778
|
)
|
|
$
|
(25,529
|
)
|
|
(1)
|
Corporate eliminations represent the elimination of depreciation expense recorded by Pursuit associated with previously eliminated intercompany profit realized by GES for renovations to Pursuit’s Banff Gondola.
|
29
Note 23. Common and Preferred Stock
Common Stock Repurchases
We previously announced our Board of Directors’ authorization to repurchase shares of our common stock from time to time at prevailing market prices. Effective February 7, 2019, our Board of Directors authorized the repurchase of an additional 500,000 shares.
During the three months ended March 31, 2020, we repurchased 53,784 shares on the open market for $2.8 million. As of March 31, 2020, 546,283 shares remain available for repurchase. No shares were purchased on the open market during the three months ended March 31, 2019. Additionally, we repurchase shares related to tax withholding requirements on vested restricted stock awards. Refer to Note 3 – Share-Based Compensation.
In March 2020, our Board of Directors suspended our share repurchase program.
Stockholder Rights Plan
On March 29, 2020, our Board of Directors adopted a short-term stockholder rights plan and declared a dividend payable to stockholders of record on April 13, 2020 of one preferred stock purchase right per each outstanding share of Viad common stock to purchase one one-hundredth of a share of Viad’s Junior Participating Preferred Stock at an exercise price of $115.00. Our Board of Directors will be able to redeem the rights at $0.01 per right at any time before a person or group acquired 10% (20% in the case of a passive institutional investor) or more of the outstanding common stock. The rights expire on February 28, 2021, subject to our right to extend the date, unless we redeem, exchange, or terminate the rights earlier.
Subject to limited exceptions, if a person or group acquires 10% (20% in the case of a passive institutional investor) or more of our common stock (including shares that are synthetically owned pursuant to derivative transactions or ownership of derivative securities) or announces a tender offer, and the consummation of that offer would result in such ownership (we refer to such a person or group as an “acquiring person”), each right will entitle its holder to purchase, at the right’s then-current exercise price, a number of shares of common stock having a market value at that time of twice the right’s exercise price. Rights held by the acquiring person will become void and will not be exercisable. If the Company is acquired in a merger or other business combination transaction that has not been approved by our Board of Directors after the rights become exercisable, each right will entitle its holder to purchase, at the right’s then-current exercise price, a number of shares of the acquiring company’s common stock having a market value at that time of twice the right’s exercise price.
Note 24. Subsequent Events
We completed the following measures to mitigate the negative financial impacts due to COVID-19:
|
|
•
|
On April 20, 2020, we suspended our 401(k) Plan employer match contributions.
|
|
|
•
|
In early April 2020, we borrowed $31 million under the 2018 Credit Facility.
|
|
|
•
|
On May 8, 2020, we entered into an amendment to the 2018 Credit Agreement that waived our financial covenants for the quarter ending June 30, 2020. The amendment, among other things, (i) suspended the testing of the interest coverage ratio and the leverage ratio for the fiscal quarter ending June 30, 2020, (ii) added a new minimum liquidity covenant applicable at all times during the period from the effective date of the amendment until the first business day after we deliver quarterly financial statements and the related compliance certificate for the fiscal quarter ending September 30, 2020, and (iii) extended the deadline for delivery of quarterly financial statements for the fiscal quarter ending March 31, 2020 to 75 days after the close of such fiscal quarter.
|
|
|
•
|
We availed ourselves of governmental assistance programs for wages and tax relief.
|
|
|
•
|
In May 2020, we terminated our legacy life insurance policies on former employees and received the cash proceeds of $24.8 million.
|
30